Dow Jones and S&P 500 rise, Nasdaq trades lower as investors eye Santa Claus rally
Yahoo Finance's Jared Blikre breaks down the prospects of a Santa Claus rally this year and what that portends for stocks in 2023.
Video Transcript
RACHELLE AKUFFO: All right, let's turn now to the broader markets. As the year end approaches, investors look ahead to the prospects of a Santa Claus rally. But will investors end the year with a holiday gift or a big lump of coal? Well, with more on this, we have Yahoo Finance's Jared Blikre. So Jared, what are we expecting?
JARED BLIKRE: That's right. The official Santa Claus rally kicks off today. This is the fifth last day of the year. It's going to continue through next week, and the first two trading days of the new year. That's 2023. As you can see, it's a mixed day here. The Dow is up, the NASDAQ down. S&P 500 just up marginally.
And I want to show you what's going on a longer term basis with the NASDAQ, you can see, down 33% year to date. And we are camped out by the lows here. This is reminding me of the end of the year in 2018. And we had a bear market at the time. Fed was in focus. And there was a little bit of a change of mood. In fact, the S&P 500 the day after Christmas had its best day since 2009.
And interesting news there. And I'm not going to get into that. But I just want to show you what's happening with the S&P 500 because the Santa Claus indicator was actually invented by Yale Hirsch back in the 1970s, and this is an indicator that's really trying to tell you what is going to be happening in the future, more than reflecting what's happening at the end of the year.
So let me just show you, this is a December seasonality pattern. This is the Dow, S&P 500, and NASDAQ. Lots of lines here, but the bottom line is that it tends to trough in the middle of the month. And here's where we are-- tends to accelerate into the end of the month. And so if we can take advantage of that, we do have some good prospects for January. And that's kind of where all of this fits into place here.
Yale Hirsch, as I said, invented and named the Santa Claus rally back in 1972. It's misunderstood. It's not a trading strategy. It's an indicator. The SCR is a short, sweet rally that runs from the five trading days of the new year to the first two trading days of the new year. S&P 500 posts an average gain of 1.3%.
And here's where it gets really critical-- failure to rally-- that is, if there's a failure of the Santa Claus rally-- it tends to proceed bear markets or times when stocks could be purchased at lower prices later in the year. And here's the famous line from Yale Hirsch-- if Santa Claus should fail to call, bears may come to Broad and Wall. That would be Broad Street and Wall Street down at the New York Stock Exchange.
So it, combined with what happens in January, could portend either strength or weakness in the new year here. So we'll have to see, and we'll revisit this in the first two days of January, guys.
AKIKO FUJITA: Yeah, love the festive red jacket, Jared.
JARED BLIKRE: Thank you. Appreciate that.
AKIKO FUJITA: Let's hope that's a sign of things to come, at least investors looking for that Santa Claus rally.
JARED BLIKRE: My own indicator, I hope so.
AKIKO FUJITA: Thanks so much for that.